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tv   Nightly Business Report  PBS  February 25, 2013 7:00pm-7:30pm PST

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to equities again. floor broker art cashin says today's selling was mostly a reaction to italy's election, and that the stock market is not yet focused on sequestration. >> i don't think that even we slip into sequestration it will have the same dramatic effect that the fiscal cliff and the debt ceiling had. it is seen as somewhat temporary. >> reporter: others say stocks can weather another political deadline dominating u.s. headlines, as long as lawmakers reach an agreement soon. >> they are expecting that dip into sequestration to be fairly short-lived and there to be a compromise worked out sometime before the ongoing resolution on march 27. so, there is room for disappointment if we don't get that silver bullet. >> reporter: still, stocks are vulnerable to myriad other headwinds too, the most notable is the end of a surprisingly good earnings season, and a muddled outlook for corporate
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profits in 2013. >> we've seen first quarter earnings growth expectations shrink to just a little over 0% from expectations of 3% or 4%. so, it's almost as if for every percentage point companies were beating fourth quarter numbers analysts were cutting the first quarter numbers by a similar amount. >> reporter: so even if sequestration doesn't kill the stock market rally. it could certainly amplify a correction that may have already gotten started. suzanne pratt, "n.b.r.," new york. >> tom: as suzanne mentioned, we're just days away from $85 billion in federal spending cuts hitting the u.s. economy. today, the war of words over the sequester continued. president obama called on the nation's governors today to pressure lawmakers over the sequester, saying citizens of their states will be out of work. the american people are out there ef row day meeting their responsibilities, giving it their all to
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provide thor their families and their communities. a lot of are you doing the same things in your respective states. we need that same kind of attitude here in washington. at the very least the american people have a right to expect that from the representatives. >> we've got more on this from darren gersh. he spoke with one of the republican leaders in the u.s. house today. cathy mcmorris rogers. we began by asking whether the sequester will actually happen. >> i hope not. we'll see. march 1st is right around the corner. and what we need is for the president and the democratic senate to sit down and come up with a proposal to replace the sequester with a smarter approach to cutting the federal government. it's 2.4% over the next ten years. >> what is going to happen under the sequester and all the 50 states.
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and in your state, there will be a heavy impact on defense employees. 29,000 in your state. what are you going to tell those people when they're furloughed. >> i'm very concerned about the way sequestration disproportionately impacts the military, our national defense which is the priority within the federal government to protect the citizens. so there is a better way. and the republicans in the house have twice now passed legislation. we passed legislation six weeks ago. we passed a bill six months ago to replace the president's sequester cuts with smarter cuts in reforms that will accomplish the goal. >> so the president says we need spending cuts but we also need tax increases. it should be balanced. are there any tax increases that republicans would accept to get over this problem that you say you want to get over? >> the agreement a year and
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a half ago was to reduce some spending in the federal government. and it just, to some it's like it's never the right time to actually cut the spending. the president often says well we need to raise taxes. that seems to be his solution every time. and we need the democrats to recognize that we have a spending problem. >> but if we cut 700,000 jobs, that's what some estimates are of the sequester, how does that create certainty, doesn't that hurt the economy? >> well, there's a smarter way than the president's sequester. it doesn't have to be the approach that he's outlined. and that's where we really need the president, we need the senate, to sit down and start talking about, start figuring out the better way forward where we replace the president's sequester, but still find the savings within the federal government. and they're there. 2.2 billion dollars for a free cell phone program, just in 2013.
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we spent 2.2 billion. there's smarter ways to go in there and find the savings within the federal government. and that's where we need to get. that's where we need to start having that discussion. >> are there any tax changes, tax loophole changes anything like that that the president has suggested that republicans might support? >> well, we're going to talk, we believe in tax reform. and we need to talk about a simpler, flatter, fairer tax code t would also help our economy if we could simplify the tax code both for individuals and corporations. and the republicans have long been talking about the importance of tax reform as a part of getting our economy growing. and that is going to be a separate discussion though than sequestration. sequestration, across-the-board cuts, that is part of raising the debt ceiling a year and a half ago. and we agreed that we were going to find some spending reductions in the federal government, it's slowing the rate of growth within the federal government by 2.4%. this is possible, everybody
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in america has had to tighten their belt a little bit and it's time for the federal government to do likewise. we've seen record increases in spending under this administration. >> so you talked about these cuttings about 2.4% of spending, so are you saying basically that the white house is kind of blowing this out of proportion when they say this is going to be such a terrible impact on the economy and people. >> it depends on how the white house, how president obama actually implements hits sequester and how he finds these saving, for him to say within the defense part, the first place we are going, we are to the going to send the second carrier into the persian gulf, i really question that decision. there is other areas within the defense department where we request find the savings. that needs to be the goal, the smarter spending reductions that will actually help get our budget where it needs to be and ultimately help get our
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economy growing again. which is the goal. >> kathee mcmorris rogers the chair of the house republican conference, thank you very much for your time. >> thank you. >> susie: still ahead, will rising home prices keep shares of home improvement retailers like lowes and home depot popping this spring? >> tom: an update tonight on two big trials, first, the civil trial against b.p., and its contractors, stemming from the 2010 rig explosion and subsequent oil spill in the gulf of mexico. the government began the trial saying the primary fault of the disaster quote lies with b.p. the other big trial, saw some high profile testimony today as macy's c.e.o. terry lundgren testified in his company's fight with j.c. penney over who has the rights to carry martha
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stewart home goods. >> susie: despite the big stock sell-off today, shares of barnes and noble surged more than 11%. investors bought up the stock on news the bookseller's founder and chairman wants to buy the retail business. in a securities and exchange filing, leonard riggio said he plans to make an offer for barnes & noble's bookstore chain, but not its nook e-reader business. erika miller takes a closer look at whether splitting the company makes strategic sense. >> reporter: what's interesting about leonard riggio's bid is that he wants to buy the weakest part of barnes & noble's business: the bricks and mortar bookstores. during the all important holiday season, sales at b&n's bookstores and website fell more than 10%. still, some think those bookstores may be a hidden gem: >> there are many americans who still like walking into a store to buy books to browse through the books and get a better sense of what they might want to read. often times, if the price is about the same, and you're already there, you can have it.
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you can walk out with that book. >> reporter: the bookstore business has deteriorated dramatically in recent years, as more people choose to buy their print books online from places like in addition, more and more people are reading their books electronically, on devices like tablets and e-readers. borders, b-dalton, and other book chains have gone out of business. but that means less competition for barnes and noble: analysts think riggio may have a viable turnaround plan ready: >> he's looking at everyone who has gone out of business and he's saying to himself, if i can add three or four more categories in these big box stores, that are consistent with the book business, i've already got all the overhead. i can close a few stores. suddenly, i've doubled my profitability. i think he's got something like that in mind. >> reporter: riggio joins a growing list of executives hoping to buy the struggling companies they founded, including michael dell of dell computer, and best buy's richard schultze. erika miller, "n.b.r.," new york.
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>> susie: lowe's nails it today with better than expected quarterly results. not only did the home improvement retailer post solid earnings and revenues, it's upbeat about its outlook for this year. but as ruben ramirez reports while lowe's and its competitor, home depot expect a bump in sales on the back of new home construction, their success is still dependent on everyday consumers opening their pocketbooks. >> reporter: home improvement retailers continue seeing the trickle down effect of a recovering housing market and a
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boost in renovations on the back of a better economy. about a quarter of sales at lowe's and home depot come from home construction and renovation. during the housing downturn, lowe's tightened its toolbelt, closing stores, cutting costs and investing in its online business. it's a plan that is starting to pay off. >> it really will take a couple of years yet before the combination of improved merchandising, better supply chain execution and really overhauling a lot of the stores operations before we see some meaningful operating margin expansion. >> reporter: wahlstrom says lowe's 4% growth target for 2013 is aggressive but achievable. the company saw some strength in sales from superstorm sandy, home depot, which reports results tuesday, likely will also see a sandy-related sales bump. most analyst expect home depot to outpace lowe's for the fifteenth straight quarter. >> renovation activity will be key here as people rebuild and renovate so i think that's going
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to be a key sector as well in the recovery in housing this year. >> reporter: both retailers are getting ready for their biggest selling season, spring. lowe's says it will add workers this year. already, home depot has announced it plans to add 80,000 seasonal workers. >> they're seeing good traffic in the stores and they just want to capitalize on the individual that does come into the store and hopefully help them out with their project and establish a long-term relationship and get them to spend a little bit more money. getting shoppers to spend a little bit more is something both lowe's and home depot are banking on this year. but economists say it could be a challenge as consumers realize how much the expiration of the payroll tax cut took out of their pockets. ruben ramirez, "n.b.r.," new york. >> tom: over the past year as the housing market bottomed and began to turn up one of the hottest stock sectors was the homebuilding sector. as orders for new homes picked up, earnings improved and the homebuilders exchange traded
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fund gained more than 37% in the past 12 months. it has fallen recently as earnings comparisons are getting tougher. tonight's "word on the street" is: homebuilder. debra borchardt is markets analyst with the >> deborah is the home building stock rally over. >> no i really don't believe so although what i would say is some of the names are a little bit overbought. and that they have seen this rally and they've really made some big moves. and so what i really did was try to take a look at some of the home builder names that are fairly new to the market, names that people aren't as family with and don't really have a lot of analyst coverage so there might still be some room to play. >> the headline members here lennar, kb home, pulte group but one of the new ones is tri-point homes, tpa the ticker, became the first home builder with an ipo in almost a decade earlier this year, $17 a share, it's above that today. what do you make of tph. >> when you look at the
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numbers, it was almost shocking because i thought are you kidding me? a home builder in califoia. that was ground zero for toxic mortgages. and i was a skeptic going in. but i looked at the numbers and i was really impressed. they built 100 homes in their first year. they had a community called-- they completely sold out of all of those homes. they are really doing very well. they've got a very experienced management team. they're going in to colorado in the spring of 2013. so i was really impressed at the numbers that they are pulling in. and the amount of homes that people in california are buying. i mean it looks like thins are really starting to turn around in california. >> skeptic turns around herself it sounds like for tph. you mentioned building homes. you have to have a lot of supplies do that. boysy cascade is one of those, bcc, familiar long-term-- it just became a new public company early this month, engineered wood products. it sold at 21. it's at $27 her share, it's had a nice rally. >> it sure has. but i really think that this stock has not been
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discovered by the general public because again the analysts have not started covering these stocks because they are fairly new so when you really take a look at their numbers, this is a really impressive company. and as you mentioned they do engineered wood products, laminated veneer lumber which is lvl, and these are much stronger materials than just a plain wood to put in a home. and with the housing codes getting really tough, they are really the product of choice. they are building a new facility down in florida. and i hope that's not because there are so many hurricanes down there. but they are building a whole new facility, they're increasing and expanding the facilities that they have. so i really think that this is a name that's been under the radar and that's boise cascade. >> on the radar now tonight. how but, do you have any positions in these stocks? >> i don't. >> it's word on the street. debra borchardt from
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>> warren buffett said today he's buying another newspaper. he's picking up the tulsa world, bringing berkshire hathaway's port pot of small and medium size newspapers to 28. and you know tom, it's really surprising because buffett has told shareholders in the past that the newspaper's industries prospects are so bad that he wouldn't buy a paper and here's a quote at any price. but now last year he bought his hometown paper, the omaha world herald, now this deal sounds like maybe a change of heart, right? >> maybe. a media mogul in the making. he began as a paperboy in omaha so he certainly knows well of that industry, and the woes it had over the past several years. speaking of woes, how about the markets today on this monday back to, without.
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major indes. the major indices suffered their biggest one day decline of the year with traders pointing to a closer than expected election in italy. there was no clear winner of the italian election, fueling worries about political and economic instability. here in the u.s., the s&p 500 saw its morning rally fizzle before noon eastern time, with the selling picking up in the final hour of trading. the index finished down 1.8%, failing to find buyers despite several announced corporate buy- outs. trading volume was on the heavier side. 818 million shares traded on the big board. just under two billion moved on the nasdaq. all 10 of the major stock sectors were down, with the heaviest selling in the financial, energy and material sectors. each dropped by more than 2%. life insurance stocks weighed on the financial sector, as their investment portfolios may have experienced some pressure with the down market. genworth financial fell 5.6%, lincoln national was down 4.7%, and hartford financial dropped 4.3%. all three have traded at 52 week highs this month. there was a billion dollar deal in energy, and this one involves a chinese company buying u.s.
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energy resources. sinopec international petroleum will buy a stake in an oil and natural gas field straddling the oklahoma, kansas border. sinopec is buying the stake from chesapeake energy, which has been looking to sell off assets in order to raise money and pay down debt. the chinese company is spending just over $1 billion. but that price was lower than expectations, sending shares of chesapeake tumbling 6.8%. volume was heavy with the stock finishing at a three week low. this deal markets just the latest buyout of u.s. energy fields by a foreign company. the biggest deal of the day was in health care with irish drug maker elan the target of an offer from a pharmaceutical investment firm. royalty pharma said it approached elan last week about a take over. after talks, the offer was $6.6 billion, or $11 per share. the two companies reportedly have not had any talks since. shares of elan rallied 5.1%, closing above the offer price, indicating the market thinks a higher price could be coming. just this month elan announced a $3.3 billion deal to sell its share of multiple sclerosis drug
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tysabri to its partner. the drug accounts for most of elan's revenue. bio-pharmaceutical company affymax was a half billion dollar firm friday. tonight its market value is under $100 million with its share price cratering 85%. after reports of severe allergic reactions, and some deaths in kidney disease patients taking its anemia drug, affymax yanked the medicine off the market. four of the five most actively traded exchange traded products were lower. the s&p 500 volatility note, which moves in the opposite direction of the broad market, shot up 13.7% as stocks sold off. and that's tonight's "market focus."
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>> tom: we continue our monday series with some of the nation's top universities, we call it "nbr-u." our partners from harvard, stanford, wharton and vanderbilt, bring us vast knowledge about business issues. and you can read in-depth articles at:, just look for the "nbr-u" tab. tonight, the bond market rally has lasted for a generation. with interest rates at historic lows, there is concern rates have only one direction to go, and that will push bond prices down. i spoke with franklin allen, professor at the wharton school, and began by asking whether he thinks the 30 year bull run in bond prices, is coming to an end. ask. >> it may do but i woon be sur prised if it went on for a little bit longer. >> when it does end will it
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be with a whimper or with more of a bang? >> it depends very much what happens between the president and congress in the negotiations about the budget deficit this year, i think. >> we certainly saw in 1994 the last time we had a really big move in a very fast move in interest rates, they moved higher pretty quickly. could we see the same thing if there is no long-term resolution? >> i think it is unlikely that we'll see a very fast move if there's no long-term resolution immediately because there's always the possibility of pushing it into the future. and that's quite possible this time around too. the one thing that might make a big move possible is if there's some international incident or something like that which gets the chinese and the japanese to start withdrawing large quantities of their money. then i think we could see a big rise in interest rates.
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>> those, of course, are big buyers of u.s. bonds. some argue though that essentially the federal reserve is making an artificial interest rate. would you agree? >> i agree with all of that few. and i think it's not necessarily a good thing because they are discourting the-- distorting the prices and not giving the correct feedback to the economy from the long-term interest rate because they're making is so much of the market. >> certainly bond investors have benefited from it though. was's the damage to them with the federal reserve in there? >> well, the damage is that some point in the future, and who knows when, but there is likely to be a significant rise perhaps because of inflation fears. and then they will lose out. and that will be a problem, i think. it's very unlikely long-term interest rates will stay where they are at the moment for a long period. >> the low-interest rates. impacted almost all of fixed
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income including even municipal bonds, corporate bonds and even the so-called junk or high-yield bonds. is there much value left any longer, could interest rates still fall from these historic lows? >> yes, that is certainly possible, although it seems strange. >> i got to ask professor do you own any government treasuries yourself? >>. trying to take advantage, should there be inflation in the years ahead with those treasury indexed protection securities. >> yup. >> professor. >> exactly. >> professor franklin allen along with us, with the wharton school at the university of pennsylvania. thank you, sir >> susie: tomorrow on "n.b.r." >> susie: and finally tonight, nothing like winning a best picture oscar to boost sales, taking the top honors, argo. produced, starring, and yes, directed by ben affleck. argo already beat warner brothers' expectations taking in $127 million in u.s. and canadian theaters.
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the dvd came out last week and is expected to see a spike in sales. tom, just taking that oscar statue home can raise a film's revenue by a third or more, it's what hollywood calls the "oscar bounce." >> susie: that's "nightly business report" for monday, february 25. have a great evening everyone, you too tom. >> tom: goodnight susie, we'll see you online at: and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh ♪)
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